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Continuing its selling spree for the eighth consecutive month in May, foreign portfolio investors have pulled out around Rs 2.5 lakh crore from the Indian equity market.

So far in 2022 itself, FPIs sold investments worth over Rs 1.7 lakh crore, as per data available with National Securities Depository Limited (NSDL) showed.

With this recent slippage of investments out of India in these consecutive months in a row, FPIs have trimmed an amount over and above their entire portfolio created in the preceding 7-8 years. Overseas investors bought Rs 2.2 lakh crore equities between 2014 and 2020 in the domestic stock market, Moneycontrol reported, quoting NSDL data.

Notably, the unprecedented FII sell off has been fuelled by soaring global inflation, the possibility of aggressive monetary tightening in India and other advanced countries including the US, fears of a recession in the US and the ongoing war in Ukraine.

There are strong possibilities of more policy rate hikes in the US in the coming monetary policy meets.

In India too, central bank RBI is mulling further rate hikes, said its Governor Shaktikanta Das earlier this week, but declined to mention by what percentage points.

Earlier this month, the RBI's Monetary Policy Committee (MPC), in an off-cycle review meeting, hiked the benchmark rates by 40bps to 4.4 per cent owing to a high inflation at over six per cent upper tolerance band for four months in a row. Das said the move was taken to avoid a steep hike in June.

"Globally, risk aversion is high and markets may continue to be under pressure for some time. This, together with the rupee's depreciation versus the dollar, raises the possibility that FII outflows may continue in the short term," said Yesha Shah, Head - Equity Research, Samco Securities.

From a more mid-to-long term perspective, given India's fundamental positioning and structural appeal among emerging economies, foreign investors are poised to make a comeback, Shah added.

However, according to Manojh Vayalar, VP- Equity Derivatives at Religare Broking: "This (current trend) suggests that the net outflow in equity that we have been witnessing since the last 8-10 months is rather a profit booking than an hurried exit."

The money the foreign investors invested in the last 10 years as per index has yielded them around 80 per cent returns, Vayalar said.